MHC class I molecules are the major receptors for viral peptides and serve as targets for specific cytotoxic T lymphocytes. HIV-1 infection of T cell lines decreases cell surface expression of class I and decreases the promoter activity by up to 12-fold. Repression is mediated by the HIV-1 Tat protein, derived from a spliced viral transcript, identifying a novel activity for this two-exon Tat, distinct from the transactivation of the HIV LTR common to both one- and two-exon Tat. Tat represses transcription of both the genes encoding the MHC class I heavy chain and the 2-microglobulin light chain. In both cases, repression is mediated through the core promoter. Mapping of functional domains of Tat protein demonstrates that repression and activation are mediated by distinct and separable domains. Tat repressor activity depends on C-terminal sequences, whereas transactivation depends on N-terminal sequence; both functions require core sequences. The repressor activity requires a domain encompassing the region encoded by the second exon of the Tat gene and also depends on the presence of a lysine at position 41, located within the core of the protein. Tat repressor activity is completely independent of two N-terminal domains essential for transactivation, the acidic segment and the cystein rich region. Conversely, Tat transactivation is independent of the second exon encoded region of Tat. As further support for this novel model of separable Tat functions, we have shown that in murine fibroblasts, Tat represses class I promoter activity, but does not transactivate the HIV LTR. We propose that distinct structural domains mediate Tat's two functionally distinct activities. Using yeast-two hybrid screening, we have determined that Tat interacts with the TAFII250 component of the general transcription factor, TFIID. The interaction between Tat and TAFII250 is extensive. The C-terminal domain of Tat, which is necessary for repression, binds to a segment of TAFII250 that encompasses its HAT domain. The N-terminal segment of Tat, which contains its activation domains binds to two discontinuous segments of TAFII250 located between 885-984aa and 1120-1297aa. Binding of Tat to the 885-984aa segment of TAFII250 requires the cystein rich domain of Tat, but not the acidic or glutamine rich domains. Binding by the N-terminal domain of Tat to the 1120-1279aa segment does not involve the acidic, cysteine or glutamine-rich domains. Interestingly, we have demonstrated that transcription of the HIV LTR does not depend on TAFII250 which may account for its resistance to Tat mediated repression.